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Stark: Job One for House Democrats Is Protecting Medicare Entitlement

By John Reichard, CQ HealthBeat Editor

October 17, 2006 -- To an industry audience that has largely tuned out the liberal spectrum of the congressional airwaves the past dozen years, tuning into Pete Stark on Tuesday afternoon and his plans for the House Ways and Means Health Subcommittee under Democratic control might have seemed like a tympanic explosion. Attendees at the speech, which was sponsored by the National Medicare Congress, didn't necessarily sit bolt upright in their chairs at the remarks by the Subcommittee's top Democrat, but seemed at a loss to know how to react to the starkly different tone they may be paying close attention to if the House flips in the midterms.

When they finally did begin to pose questions to Stark during the Q & A session after his remarks, one audience member asked him to assess the legacy of House Ways and Means Committee Chairman Bill Thomas, R-Calif., with respect to Medicare. "He was a failure," Stark replied tersely. "He was unable to dismantle it."

But if Stark's remarks grated on the ears of the GOP-friendly members of the audience, they were couched in terms that in some respects could be perceived as industry friendly.

The main job of a House controlled by Democrats would be to protect entitlement programs such as Medicare, he said, asserting that doing so would benefit the bottom lines of companies doing business with the program. Government also should boost Medicare payments to help providers pay for health information technology, Stark declared.

He appeared to say that doctors should not be penalized with lower payments if they don't rate highly on performance measures, unless their care can truly be tied to improved treatment outcomes. And industry would benefit from sorely needed congressional oversight of the program, according to Stark, who said that improved functioning of Medicare would deliver faster answers to industry requests for coverage of products and services.

But his main message of the day was that Republicans are intent on ending the Medicare and Social Security entitlements enjoyed by Americans for many years and that the top job of House Democratic leaders will be to protect those entitlements. For his part, Stark shied away from predicting Democratic control, saying "the bananas of victory are too green for me to order new stationary."

"There is no question that for the most part the Republican Party and certainly . . . the White House would like to see Medicare end as an entitlement," Stark emphasized. Instead, it would be replaced with a voucher system in which seniors are given a fixed sum of money to shop for a private plan, he suggested.

A second consecutive year of the so-called "Medicare trigger," in which Social Security Trustees declare that general revenues will make up more than 45 percent of total Medicare spending within seven years, will be the "nail in the coffin" of the entitlement, he said. It would lead to Republican proposals that if enacted would end the program's current guarantee that beneficiaries receive a defined package of benefits regardless of the yearly Medicare spending total.

Trustees issued the first trigger warning earlier this year.

Stark said that if Democrats gain control of the House they will hold a series of oversight hearings, including on long-term financing of the program. Asked after his speech where he would go to finance Medicare for the baby boomers, Stark said that depends on the dimensions of the financing problem and even whether one exists in the short term. That needs to be studied, he said. The jury is out on that question and on whether economic productivity won't be sufficient to prevent shortfalls, a Stark aide added. Trustee projections are based on relatively pessimistic growth estimates, the aide said. She added that according to one analysis, reliance on historical rates of productivity growth would "evaporate the crisis."

Stark rejected suggestions Monday by former Centers for Medicare and Medicaid Services Administrator Mark B. McClellan that Medicare's viability can be sustained in the long term by charging wealthy beneficiaries more for Medicare benefits. McClellan said that Medicare is such a good deal on health care that wealthy people won't drop out of the program in large numbers if charges to them are increased and that if they do, they will come back into the program even with the penalties involved when their health care needs increase.

But Stark said of Medicare that "in fact it already is highly progressive." Its funding already is based on a "very linear" relationship between income and taxes, with an "absolutely flat universal benefit." He added that "for just that reason, everybody participates, and they participate on a fair basis." Since its inception, Medicare "has not been able to be branded as a welfare program," he said. But increasing premiums paid by the affluent even further would cost it vital political support, he suggested.

Stark told industry executives that it is in their self-interest to support the Medicare entitlement. "I just want all of you here to think about your revenues," he said. Health care companies are going to lose revenues if the Medicare entitlement is ended, and that lost revenue will be hard to replace. It "ain't going to come from the health care fairy," he said. "My pitch to the private sector, the Wall Street gang, is you can't afford to lose Medicare, and lose it you will if it loses its status as an entitlement."

Stark said Congress should minimize or prevent cuts in Medicare payments to physicians for a year while working out a plan with the Government Accountability Office and the Medicare Payment Advisory Commission for overhauling the current physician payment formula. Despite all the talk about cuts, however, he said that doctors' gross incomes, with the exception of family physicians, are on the rise.

Stark expressed skepticism about tying higher payments to pay-for-performance measures, suggesting that if doctors and pharmacists are licensed, it ought to be presumed they are delivering quality care. Once data systems are able to identify differences in treatment outcomes, payments could be made on a differential basis.

Stark also said it's time to adopt a standard program for health IT. "Somebody has to say, 'here gang, this is the program.' Period. And you know what? Whoever does it, it'll be wrong." Many providers will have to reprogram, retrain, buy new software, but "that's going to happen whatever plan is picked."

"So let's pick one now, and let everybody swallow their gripes, and get about improving it so that perhaps five years from now we have a system that everybody grudgingly is going along with and we would have a medical information technology system that would save us money, help with diagnostic work, and be a real boon to medical care in this country. But somebody is going to have to bell the cat. This idea that you are going to have 15 different proprietary plans out there all sharing information is bunk."

Down the road, Medicare will have to tell providers they won't get paid if they don't have electronic record systems, he said. Until then, the government is going to have to help providers pay for it. Providers might receive add-on payments for five years to purchase IT, he said—such as getting 10 percent add-ons to their payments the first year, 8 percent the second year, 6 percent the third year, 4 percent the fourth year, and 2 percent the fifth year.

Stark dismissed the idea that health IT donations by hospitals wouldn't be used to steer referrals. "If you believe hospitals are going to give out free software without having a big string attached, guess again," he said.

The notion of Stark's message as industry friendly only goes so far, of course. "Overpayments" to managed care plans in Medicare are unaffordable and must stop, he said. Managed care plans are paid much more than fee-for-service providers, but Medicare could save $60 billion over 10 years if payments were equal, he said.

Stark repeated the familiar Democratic charge that the Medicare drug benefit was designed to pump up drug company profits and said his party would seek to add a government-run plan to the mix of private prescription drug plans offered by Medicare. The government would be able to negotiate prices for the plan it sponsors, he said.

But with Democrats only in charge of the House "I don't think you're going to see major legislation for the next two years," he said. But Stark said there are more subjects for oversight hearings of Medicare than there are House hearing rooms. The functioning of Part D would be a prime but not an exclusive focus—not for "gotcha" hearings but to assure the smooth functioning of the program after years of no oversight, he said.

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